Market Rockets even higher – 200 DMA has been breached $SPX [chart]

Despite the recent chants that the markets are dead we are falling apart and going to 950 or 600 or 90 they have instead rocketed in the upward direction with a dizzying momentum. Those of us who study thrust and breadth are shaking our head. While we could see the turning tides we could not estimate its size. By all means yesterday should have been a consolidation day but instead gave us another 3 digit DOW day.

Today, again should be a consolidation day.. it looks like we are going to gap up possibly. Despite my longtime bullish outlook I just might short this gap up today in anticipation that some of the upward momentum might just be ready to stall. All 9 indicators are at historical stretched overbought areas calling for some calmness and rest before resuming a more leisurely upward climb.

Quote of the day: A human being has a natural desire to have more of a good thing than he needs. – Mark Twain

Chart

Score

Day-1

Change

40 DPI

+6

+6

0

52 WNH

+6

+6

0

10 DHL

+6

+6

0

Total

+18

+18

0

Not much to say about breadth except that we are in our third day of being maxed out to the bull side and reaching overbought on the 10 DHL in particular. The violence in the move captured in the 40 DPI needs to be tempered with a day of weakness and a soft close. A couple days of sideways would heal the market well.

$SPX chart:

I spent quite a bit of time on the charts this morning trying to find out what is above and below yesterday’s close. We are getting a gap up this morning which I think might actually scare the buyers off and encourage the bears to come in for a little pillage. I have the top of the charts for SPX at 1116 for the next couple for days. The problem with that is we are gapped up to open around 1118 and 1119. So assuming I am wrong today about consolidation I have 1120 as resistance to the upside. If the market breaks decides to show historic strength and go higher I have clean air all the way up to 1131.50. I assume there is something in between and the market will discover it and draw it out for us today if we continue to the upside.

Now the downside. There shouldn’t be much. Consolidation should be a number of narrow range days with less than 1% downside from the high. The end of consolidation should be a one day or possibly two days of a downward head fake with the resumption of the the uptrend. During the consolidation we should remain in a trading range between 1120 and 1102 and ideally between 1108 and 1116. 1102 is about a 1% pullback from 1116, 1093 is a 2% area. If we go below that we need to do a little more studying. Both are good dip buy points if you think we go higher still.

A breakout above 1120 today will have me working extra hard tonight as extremely extremely overbought can sometimes lead to more violent consolidations.